Healthcare and Drugs in America

Powerful Essays
Healthcare and Drugs in America

It is no secret that the cost of American healthcare is on the rise. Already the nation is spending about $1.65 trillion a year on healthcare. That represents 15 percent of gross domestic product, the total output of goods and services. It consumes one-fourth of the federal budget, more than defense. (Allan Rubin) This is due to the factors of expensive technology, less stringent HMO cost management, and more specifically to this paper, rapidly rising drug costs. Surveying nearly 3,000 employers, Mercer Human Resource Consulting finds that their health-benefit costs rose 10.1 percent this year, while inflation hovered around 2 percent.

And as the research and development of these drugs continue to outpace inflation, most Americans will continue to pay for this trend.

How so? There are two main reasons for this phenomenon. First of all the U.S has highly favorable patent laws toward these drug companies, prohibiting normal market competition for long periods of time. These monopolies allow manufacturers to charge several hundred percent above (world) market prices. (Dean Baker and Noriko Chatani) Some pharmaceutical companies have even been accused of delaying generic drug patents through litigation, even bribery in order to keep their drug prices high. It encourages a behavior of rent seekers. And these tactics prove highly lucrative. For example the drug Cardizem, used for blood pressure and hypertension reduction, had $700 million in sales in the 11 months the generic drug was kept off the market.

This also causes generic brands to rise in cost. According to IMS Health, pharmaceutical information companies, the price for generic drugs are increasing almost twice as fast as prices f...

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Rubin, Allan and Rubin, Harold (2004) Patents and Prescription Drugs-Part I.
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